Oil holds onto gains as investors bet on tighter supply
An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China Jan 4, 2023. China Daily via REUTERS /File photo
SINGAPORE — Oil prices edged down slightly on Monday, holding on to most of their recent gains amid expectations of tighter supply from OPEC+ cuts, attacks on Russian refineries and upbeat Chinese manufacturing data.
Brent crude fell 17 cents, or 0.2 percent, to $86.83 a barrel by 0017 GMT after rising 2.4 percent last week. U.S. West Texas Intermediate crude was at $83.06 a barrel, down 11 cents, or 0.1 percent, following a 3.2-percent gain last week.
Trade volumes are expected to be thin on Monday as several countries are closed for Easter holiday.
READ: Oil prices extend upward momentum on expectations of tight supply
Both benchmarks finished higher for a third consecutive month, with Brent holding above $85 a barrel since mid-March, as the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, pledged to extend production cuts to the end of June which could tighten crude supply during summer in the northern hemisphere.
Article continues after this advertisementGeopolitical issues
Russian Deputy Prime Minister Alexander Novak said on Friday that its oil companies will focus on reducing output rather than exports in the second quarter in order to evenly spread production cuts with other OPEC+ member countries.
Article continues after this advertisementDrone attacks knocked out several Russian refineries, which is expected to reduce Russia’s fuel exports.
“Geopolitical risks to crude and heavy feedstock supplies add to strong Q2 24 demand fundamentals,” Energy Aspects analysts said in a note.
READ: Oil prices up 3% on US crude stock drop, Russian refinery attacks
Almost 1 million barrels per day of Russian crude processing capacity is offline amid the attacks, impacting its high-sulphur fuel oil exports which is processed at Chinese and Indian refineries, the consultancy added.
In Europe, oil demand was firmer than expected, rising 100,000 bpd on year in February, Goldman Sachs analysts said, versus its forecast of a 200,000 bpd contraction in 2024.
Europe’s demand firms
Europe’s firm demand, softness in U.S. supply growth coupled with a possible extension of OPEC+ cuts through 2024 outweigh downside risk from persistent softness in China’s demand, they said in a note.
“We see the risks to our forecast that Brent will average $83/bbl in 2024Q4 as skewed moderately to the upside,” the analysts said.
Still, China’s manufacturing activity expanded for the first time in six months in March, an official factory survey showed on Sunday, supporting oil demand at the world’s largest crude importer, even as a crisis in the property sector remains a drag on the economy.
Investors are also scouring U.S. economic data for signs of when the Federal Reserve will cut interest rates this year which will support the global economy and oil demand.
